Sarah Garrett's Blog

Will the budget really stiimulate the housing market?

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Thursday, April 23, 2009

This year's budget announcement included news that the Stamp Duty 'holiday' will be extended until the end of the year, instead of just up until September, on property worth up to £175,000. Also an extra £80m will go towards a shared equity mortgage scheme. However, a whooping £500m will be injected into helping stalled housing projects get back on track and £100m will go to local authorities to build energy efficient homes.

OK, whilst it is debatable that the Stamp Duty Holiday is of some use to those trying to get on to the ladder, I have never understood how injecting money into the supply of more new build properties is ever going to help the property market recover. Yes, first time buyers can help a market recovery, but surely it is much more useful for them to buy a property from a vendor, rather than an empty property from a developer. By buying from a private seller they will usually stimulate a chain of buying and selling, allowing the seller to buy another property on the next rung of the ladder. Surely producing a greater supply of properties for sale on to the market is only going to drive prices down further.

The £500m set aside for developers, sounds like another rescue package to add to the HomeBuy Direct package worth £400m, which has recently been rolled out. HomeBuy Direct is an incentive to help first timers get on to the property ladder by giving buyers an interest free equity loan, which can be used as a deposit. Whilst this solves a problem for the buyer, don't be fooled, these loans are not available on all properties, but only on certain empty new build properties that struggling developers have selected.

Whilst I agree that once the market does recover, if there isn't any building being resumed then we might have the problem of not enough supply of housing for our brimming population, this seems more a case of greedy developers, who made their money in the boom, now needing to be saved in the current crash.

If the Government really wanted to help first time buyers and stimulate the property market, they should put more funding into flexible schemes like MyChoice HomeBuy, where buyers can buy any property on the open market, including from private vendors by borrowing a deposit from the Government. This type of funding is available on a ‘first come, first served’ basis, and unfortunately in many regions has already run out.

Six ways to beat the deposit dilemma

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Thursday, April 02, 2009

House prices may be falling, giving first time buyers a glimmer of hope that they may be able to get on to the housing ladder. The National Association of Estate Agents has reported that first time buyer enquiries have doubled, although the increased speculation in the market will not convert into sales because lenders are asking for at least 20% deposit. Sarah Garrett from First Time Buyer magazine looks at how to get around the deposit dilemma…

HomeBuy Direct
The Government have tried to solve the deposit issue by teaming up with developers to introduce HomeBuy Direct, launched this month. Those canny MPs are injecting £400 million and, with the help of the developer, will loan up to 30% of the property price interest-free, for up to five years. Unfortunately this scheme is only available on selected properties. For more information contact your local HomeBuy Agent / Zone agent (details found on www.firsttimebuyermag.co.uk)

Government Schemes
Other HomeBuy schemes set up to make property more affordable also diminish the amount you need to pay on a deposit. The New Build HomeBuy scheme (shared ownership) allows you to purchase a share of one of the properties available on the scheme. The share can be from as little as 25%, which means the deposit will also be significantly less. MyChoice HomeBuy allows you to choose virtually any property for sale on the open market, and then apply for a low-cost equity loan of up to 50% which can also be used as a deposit. To qualify for the HomeBuy schemes your household income needs to be less than £60,000. To find out if you are eligible, contact your local HomeBuy Agent / Zone agent (details found on www.firsttimebuyermag.co.uk)

Developer incentives
Many new build properties are now sold with add-ons, most of which are just gimmicks to entice more buyers into their showrooms. However there are some useful ones that are the difference between getting finance and falling short. It is worth asking developers if they will match or loan you the deposit, some even pay the full 20% deposit needed outright.

Bank of Mum
Due to the cut in the Bank of England’s base rate to 0.5%, right now parents are earning significantly less on their savings in a bank compared with a year ago. Despite house prices falling, the lack of good investment opportunities has spurned on a trend for relatives to turn to a more attractive long-term investment in property for their loved ones. The Council of Mortgage Lenders estimated that nearly half of all first time buyers will be receiving assistance to raise a deposit.

Save your pennies…
For those who still have a job, at least the credit crunch has urged us to stop spending and become more prudent. Many have even cut up their credit cards and begun to save. You can save up to £3,600 tax free through an ISA, and Abbey National have launched a high-interest account specifically for those looking to save a deposit. The First Home Saver Account offers 5% gross interest in return for paying in a monthly fixed sum.

Simply wait!
The lack of attractive mortgage products being offered has led to many first time buyers without a hefty deposit struggling to finance their first home. Northern Rock’s injection of £14 billion from the Government, and a hint of the return of 90% mortgages will be a massive boost in opening the flood gates for potential buyers, and will hopefully prompt other lenders to follow suit.

Sarah Garrett

Subjects Covered by Sarah Garrett

Sarah Garrett's Blog

Will the budget really stiimulate the housing market?

Six ways to beat the deposit dilemma

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